ZYCUS INFOTECH PRIVATE LIMITED, MUMBAI V. THE DEPUTY COMMISSIONER OF INCOME TAX-13(3)(2), MUMBAI

ITA 2042/MUM/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 8019 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 30-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANISH KUMAR SINGH LD
• Assessee Lawyers: S V JHAVERI LD
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

1 IT(TP)A NO.2042/MUM/2016 M/S. ZYCUS INFOTECH PRIVATE LIMITED ASSESSMENT YEAR-2011-12 IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI , , BEFORE HONBLE SHRI SAKTIJIT DEY, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T(TP).A. NO.2042/MUM/2016 ( / ASSESSMENT YEAR: 2011-12) M/S. ZYCUS INFOTECH PRIVATE LIMITED PLOT NO.GJ 07, SEEPZ++, SEEPZ SEZ ANDHERI (EAST), MUMBAI-400 096 / VS. DY. COMMISSIONER OF INCOME TAX - 13(3)(2) 2 ND FLOOR, ROOM NO.229 AAYKAR BHAVAN, M.K. ROAD MUMBAI-400 020. !' ./ ./PAN/GIR NO. AAACE-3540-Q ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : S.V. JHAVERI- LD.AR / RESPONDENT BY : MANISH KUMAR SINGH- LD. DR / DATE OF HEARING : 17/12/2018 / DATE OF PRONOUNCEMENT : 02/01/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER):- 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2011-12 CONTEST FINAL ASSESSMENT ORDER DATED 28/01/2016 PAS SED BY LD. DEPUTY COMMISSIONER OF INCOME TAX-13(3)(2), MUMBAI [AO] U/ S 143(3) READ WITH SECTION 144C(13) PURSUANT TO THE DIRECTIONS OF LD. DISPUTE RESOLUTION 2 IT(TP)A NO.2042/MUM/2016 M/S. ZYCUS INFOTECH PRIVATE LIMITED ASSESSMENT YEAR-2011-12 PANEL-2, MUMBAI [DRP] U/S 144C(5) QUA CONFIRMATION OF DISALLOWANCE U/S 14A. 2.1 FACTS IN BRIEF ARE THAT THE ASSESSEE BEING RESIDENT CORPORATE ENTITY STATED TO BE ENGAGED IN THE BUSINESS OF SOFTWARE HAS BEEN SADDLED WITH DISALLOWANCE U/S 14A READ WITH RULE 8D FOR RS.11.30 LACS, WHICH IS THE SOLE SUBJECT MATTER OF THIS APPEAL. 2.2 DURING ASSESSMENT PROCEEDINGS, IT TRANSPIRED TH AT THE ASSESSEE EARNED EXEMPT DIVIDEND INCOME OF RS.19.18 LACS WHIC H CALLED FOR DISALLOWANCE U/S14A. THE ASSESSEE HAD NOT OFFERED A NY SUO-MOTO DISALLOWANCE AGAINST THE SAME AND SUBMITTED THAT OW N FUNDS WERE USED TO MAKE THE INVESTMENTS. HOWEVER, NOT CONVINCED, LD. A O, APPLYING RULE 8D(2)(III), COMPUTED EXPENSE DISALLOWANCE @0.5% OF AVERAGE INVESTMENTS WHICH CAME TO RS.11.30 LACS. THE STAND OF LD. AO, U PON CONFIRMATION BY LD. DRP, IS UNDER APPEAL BEFORE US. 3. THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [ AR], AGITATED THE DISALLOWANCE BY SUBMITTING THAT LD. AO DID NOT RECO RD REQUISITE SATISFACTION AS REQUIRED BY LAW BEFORE PROCEEDINGS TO APPLY RULE 8D AND THEREFORE, THE DISALLOWANCE WAS NOT JUSTIFIED. THE LD. DR SUBMITTE D THAT NO SUO-MOTO DISALLOWANCE WAS OFFERED BY THE ASSESSEE AND THEREF ORE, THE AFORESAID ARGUMENT DID NOT HOLD ANY WATER. 4. UPON DUE CONSIDERATION, WE FIND THE DISPUTE TO B E IN A VERY NARROW COMPASS SINCE BASIC FACTS ARE NOT UNDER DISPUTE. TH E ASSESSEE HAS NOT OFFERED ANY SUO-MOTO DISALLOWANCE A GAINST EXEMPT INCOME IN THE COMPUTATION OF INCOME AND LD. AR HAS RAISED A PLEA THAT ASSESSING OFFICER 3 IT(TP)A NO.2042/MUM/2016 M/S. ZYCUS INFOTECH PRIVATE LIMITED ASSESSMENT YEAR-2011-12 FAILED TO RECORD REQUISITE SATISFACTION BEFORE PROC EEDING TO APPLY RULE 8D. HOWEVER, IN THE ABSENCE OF ANY SUO-MOTO DISALLOWANCE OFFERED BY THE ASSESSEE, THIS PLEA COULD NOT BE ACCEPTED. DURING A SSESSMENT PROCEEDINGS, THE ASSESSEE HAD MERELY STATED THAT OW N FUNDS WERE USED TO MAKE THE INVESTMENTS, HOWEVER, IT IS DIFFICULT TO A CCEPT THE FACT THAT NO ADMINISTRATIVE EXPENDITURE, WHATSOEVER, WAS INCURRE D BY THE ASSESSEE TO MAKE THE INVESTMENTS PARTICULARLY IN VIEW OF THE FA CT THAT THERE WAS SHUFFLE IN THE INVESTMENTS DURING IMPUGNED AY WHICH IS EVID ENT FROM THE FINANCIAL STATEMENTS PLACED ON RECORD. THEREFORE, THE LOWER A UTHORITIES WERE JUSTIFIED IN INVOKING RULE 8D AGAINST THE EXEMPT INCOME EARNE D BY THE ASSESSEE. AT THE SAME TIME, WE ARE OF THE CONSIDERED OPINION THA T FOR THE PURPOSE OF COMPUTATION OF DISALLOWANCE, ONLY THOSE INVESTMENTS WERE TO BE CONSIDERED WHICH ACTUALLY YIELDED THE EXEMPT INCOMED DURING IM PUGNED AY. HENCE, THE LD. AO IS DIRECTED TO RE-COMPUTE THE SAME IN TE RMS OF OUR ABOVE OBSERVATIONS. 5. THE APPEAL STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 02 ND JANUARY, 2019. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 02/01/2019 SR.PS:-JAISY VARGHESE 4 IT(TP)A NO.2042/MUM/2016 M/S. ZYCUS INFOTECH PRIVATE LIMITED ASSESSMENT YEAR-2011-12 ! / COPY OF THE ORDER FORWARDED TO : 1. '& / THE APPELLANT 2. '('& / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. ) *' + , + , / DR, ITAT, MUMBAI 6. * -./ / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.